"You'll be happy to know that a hefty chunk of the $700 billion bailout designed to help banks in order to stabilize the economy has, at least indirectly, flowed into the coffers of top executives...."

"According to a study by the Associated Press, $1.6 billion of the federal bailout funds went into the pockets of top bank executives. Even institutions that have cut the salaries and bonuses of top corporate officers have awarded massive compensation packages, despite having logged billions of dollars in losses...."

The December 22 piece is honest, or accurate, enough to say that the $1.6 billion dollar figure is from 2007 - and let the reader remember that the bailout was in late 2008. The December 21 op-ed is, simply, wrong.

Review and Reality Check

The "$1.6 Billion" figure is from an Associated Press article, published yesterday: "AP study finds $1.6B went to bailed-out bank execs." What the Associated Press found was that bank executives got $1,600,000,000 in pay and perks: in 2007. That's before the federal bailout.

Lies, Assumptions, and Due Diligence

I have no idea why the authors of those two op-ed pieces were so inaccurate. It's possible that they weren't aware that what they wrote wasn't true.

The Associated Press headline might give an impression that bailout funds were part of those $1.6 billion dollars of compensation. This may help show how easy it is for "$1.6B went to bailed-out bank execs" to become "$1.6 Billion of Bailout Went to Pay Top Execs."

AP study finds$1.6B went to bailed-out bank execs (Associated Press)

$1.6 Billion of Bailout Went to Pay Top Execs (Dollars and Sense / D&S Blog)

Lies and Assumptions

Sometimes a person might write something that isn't true, but isn't intentionally lying. Assumptions are powerful things: if you 'know' that bank executives are going to steal the bailout money; and you read that they got $1.6 billion dollars; you're likely to assume that the money they got was from the bailout funds.

Someone who made associations like that might not consider the possibility that the billion-plus dollars were spent before the bailout was planned: and not read past the headline.

Due Diligence

The term has a precise, legal, definition: "A measure of prudence, activity or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances" (Mortgages, Ltd., Arizona). I think it can be used to describe the reasonable process of doing a little research before 'buying into' claims or ideas.

A Word of Advice: THINK!

I don't used all caps very often, but this warrants it. If you're running a business, you can't "trust your feelings," even if your name is Luke.

Facts are big, hard, heavy things with sharp edges. If you walk around with your mental eyes closed, you'll get hurt.

What do I Think About the Bank Executives?

It's too early to tell. The massive failure of so many financial institutions clearly indicates that something went wrong. You might call that a 'well, duh!' deduction.

I'm no financial expert, but I see at least two possible causes that make sense.

First, claims that investment banks made too many loans that were too risky could be true.

Second, although it's discussed as a possible outcome of the present crisis, I think that well-intentioned efforts at making it possible for just about everybody to own a house may have been part of the cause of the housing loan problems.

Housing Loans: Realty and Reality, a Personal Look

When I bought the house we live in now, I spent a long time negotiating ways to pay for it. I had worked the numbers, and knew both how much money we had, and how much we could pay over time. I was shown offers that looked very, very tempting - and would have allowed me to keep the house for months, maybe years.

But, each time, when I worked out what would happen as I complied with the proposed agreement, I lost the house.

I finally found an arrangement that allowed me to buy the house, and keep it. But it took time and a lot of thought. Not everyone has the background and willingness to go through that process.

Back to the Bank Executives

Loaning money to people who can't pay it back isn't a good idea: whether you do it of your own will, or are forced to do so by a well-intentioned set of federal regulations. It looks like quite a few major American financial institutions were doing just that.

And, it didn't help that the top executives were getting ridiculously large pieces of the financial pie.

I simply don't know if the debacle is the result of fraud, incompetence, greed, other factors, or some combination. There aren't enough published facts yet: not that I've seen.

Blatant Plugs

About Me

I'm a sixty-something married guy with six kids, four surviving, in a small central Minnesota town.

One of the kids graduated from college in December, 2008, and is helping her husband run a factory; another is a cartoonist; #3 daughter is a writer; my son is developing a digital game with #3 and #1 daughters, and has a day job.